Asia’s New Water Bottle

Jax Coco Goes Upscale with a Luxury Coconut Water Brand

“Still or sparkling?” The waiter asked the usual question at New York’s Mercer Street Kitchen.

Jane Gottschalk was meeting friends there in 2008. She was “hooked” on coconut water, and while it was not always available at restaurants, she scanned the menu. “Coconut water” was listed for $5.00. The brand was not named, and it arrived already poured it into a glass with ice cubes.

“And the idea came to me: Someone should do this in a bottle,” said Jane, co-founder of Jax Coco. “Still and sparkling water bottles look great. They’re left on the table. It’s part of the branding. Someone should do a great-looking bottle for a coconut water brand. Why doesn’t the waiter say: ‘Still? Sparkling? Coconut water?’”

Despite rocketing demand from affluent, health-conscious, sophisticated consumers who would not think twice about spending five dollars for a few sips of sparkling water, coconut water was – and is – marketed more like Gatorade than San Pellegrino.

Jax Coco is an unusual entrant to the market for coconut water. It occupies two fast-growing niches at once. Firstly, it is a high-end, high-style coconut water brand. Secondly, it is based in China. The moment at the Mercer Street Kitchen solidified the decision to start upscale. The decision to start in China was mostly a coincidence that has proved farsighted only in retrospect, according to Jane.

She, her Swiss husband, and their five children moved to Hong Kong in early 2011. “When we moved to Hong Kong I stocked the cupboards with Marmite and all the other things my family loved,” said Jane, who is British.

“I looked for Vita Coco. I’d become hooked on the stuff. But I couldn’t find it anywhere.” Jane and her husband were early investors in Vita Coco.

“I had seen that initial boom for coconut water,” she said, describing the years after Vita Coco launched in 2004. “I watched in amazement as a few actors and key influencers in the US – mostly in Los Angeles and New York – started drinking it and then all the rest followed. And why not? It hydrates. It tastes good. It has no preservatives. You look at it compared to a Gatorade and it’s simply a healthier drink. You’re practically cracking open a coconut and pouring it into a package.”

“There was nothing like Vita Coco on the market when we got to Hong Kong. I saw the gap. Chinese people are obviously very familiar with coconut water. In Asia it’s been drunk in raw form forever. It’s easy to buy coconuts at any grocery store. But who wants to lug home ten coconuts? You can’t do that with kids, with the space constraints of a city like Hong Kong. We thought about becoming suppliers of some other companies in the market, but the margins were small. So we said: “Hell, we can do this ourselves!”

Jax Coco – named after Jane and her husband Max – was rolled out over the next three years. Jane calls this period “a blur” of seven-day work weeks and five young children.

Today Jax Coco is on the menu at the Hong Kong’s leading five-star hotels: the Four Seasons Hong Kong, the Mandarin Oriental, and the Peninsula. Its semi-opaque bottle stands alongside San Pellegrino bottles and glasses of wine. En route to China Jax Coco is served on Cathay Pacific fights. Tetra Paks are sold at Starbucks and 7-11 convenience stores across Hong Kong Island. It is sold in Ole supermarkets in mainland China, Harvey Nichols and Waitrose in Britain, a dozen retailers in New York, and several of Ibiza’s most exclusive clubs and resorts.

Altogether Jax is sold in 35 countries after three years of operation. Instead of starting in an established market and taking its time to go global, Jax started in the biggest emerging market and then moved “back” to Britain, the US, Switzerland, Spain – all countries where Jane and Max Gottschalk have lived if their globe-trotting lives. Instead of starting mass-market and venturing high-end, it started high-end and now is venturing mainstream.

“Vita Coco and Zico were battling it out, and we came in with this very niche brand,” Jane says. “The marketing has been top-down. You enter high-end and then go to food and beverage retailers. So you start with bottles at Nobu and then go to Waitrose and Ocado and then to Tetra Paks.”

By cracking open coconuts from the Philippines and pouring them into designer bottles, Jax is capitalizing on the convergence between jet-set tastes and yoga-movement tastes. When packaged beautifully, all-natural products say something about a person’s approach to life in terms of both style and health

– and this often supports a premium price for the product.

“A lot of the other coconut-water brands are positioned as sports drinks. They’re for hydration,” she says. “We are positioned as more of a lifestyle brand. It’s aspirational. It’s about art, music, food, the things that you do while you drink Jax.” It is the exclusive coconut water of Ushuaia, Ibiza’s five-star resort, spa, and open-air club. She points to a brochure showing the Jax Polo Team and a photo of Elton John – a leading shareholder – holding a Jax bottle during his latest Asian tour.

Jax is now launching sparkling coconut water in a new, greyish bottle. (Waiter at the Peninsula Hotel: “Still? Sparkling? Coconut? Sparkling coconut?”). It has already released a line of kids drinks – sweetened with all-natural coconut sugars – called Jax Coco Kidz. Jax Coco Extra Virgin Coconut Oil is launching in Britain in November after a year of research and development. It is already used at London’s five-star Bulgari Spa.

“We’re not just targeting the market for coconut water,” Jane says. “We’re targeting the coconut market as a whole. We’re constantly expanding the product range: coconut kids food, coconut oil, coconut milk, coconut sugar, coconut chips. What we’ve developed in such a short time has almost killed us, but it’s amazing to see what we’ve come out with.”

Jax Coco is not yet profitable, she says, because it is plowing all of its earnings back in to volume growth, marketing, and new product development.

“Oil will be the next big thing,” she says. “I think we’re almost done with coconut water in terms of the market’s awareness. It’s not that the market is saturated yet, but the knowledge is there – there are a lot of options on the shelf now. People are just catching up on coconut oil: this oil that you can drop in your coffee, you rub on your skin at the spa. It has more lauric acid than anything other than breast milk, and there’s a growing awareness of how good that is for you. For me coconut oil is the next major focus.”

As an early investor in Vita Coco, Jane witnessed the US-led coconut-water boom from its earliest days. Now she is actively involved in a second-stage evolution. What does she think is driving the growing popularity of the coconut?

“Health,” she says immediately. “We eat and drink a whole load of rubbish. We’re blasted with marketing our whole lives about how we should eat this or that. But you know what? A lot of what we eat is full of artificial hormones and antibiotics, and people are catching on to that. Cows are pumped full of hormones. That is why we’re starting to see the rise of almond milk and other non-dairy milks. I’m a mother of five, and I don’t want to give my kids processed food. I know I’m not the only one.”

“As consumers we are becoming much more aware of what goes into our food, and we are becoming much more demanding of our supermarkets. And the supermarkets are responding. The vegan section has gone from a shelf to a whole aisle. Ten years ago when I was in London, Planet Organic was thought of as a place where hippies go. The things you see there – things like pure coconut water and acai berries – they have become widespread. Sure, there are lots of fads. But there is a reason that people are demanding this stuff.”

The same trend in mainland China, Jax Coco’s second-biggest market, is accelerating at a speed that she did not anticipate when she launched the company.

“Chinese consumers are becoming much more health-conscious,” she says. “Chinese youth are educating themselves about obesity, food safety, mass-produced food. The internet has obviously helped. There are meat scandals, baby milk scandals. And in these tier-one Chinese cities there’s a growing awareness of: ‘Is the meat you’re eating what you think it is?’ That’s a concern especially for the most affluent Chinese, which is why Australian meat has become such an expensive brand in China.”

“There is this fear of mass-produced food in China,” she says. “And actually this has created a massive opportunity for Chinese entrepreneurs to develop their own products in the natural-food niche.”

Vita Coco is now entering China after a decade-long focus on the US. Reignwood Group, owner of the Red Bull brand in China, recently bought 25 per cent of Vita Coco and is now planning to distribute the drink nationwide through their Red Bull distribution network. “Everyone asks what I think – am I worried,” says Jane. “No. It’s a good thing. In Asia, in China, it’s still all about educating the market. Sure, there’s a paradox in that the stuff comes from Asia, but the way it is drunk is different. We have educated the market – but in a small way. There’s a lot more to be done. So they can come in and help develop it. There is space for everyone.”

For the moment, the space for Jax is the sort of place where we are sitting: the bar of the Mandarin Oriental Hotel in London. Is Jax on the menu? Not yet. “I’m talking to them about it,” she says. “It would be such a natural fit. After all, they already serve it at the hotel in Hong Kong.”